Solid earnings reports - particularly from Meta and Amazon - sent US stock indices to fresh all-time highs to finish the week. A strong labour market report added to the positive sentiment as it was seen as a boost for future corporate earnings. Over the weekend, geopolitical uncertainty shot up once again with the US striking across multiple countries in the Middle East.
In New York, all three major indices marched on to new all-time highs at the end of the week. The Dow Jones Industrial gained 0.4% on Friday to finish at 38,654 points and the S&P 500 gained 1.1%, closing at 4,959 points. The Nasdaq-100 shot up 1.7% on Friday to end the week at 17,643 points. The tech-heavy index was particularly supported by earnings from tech giants Meta Platforms and Amazon. Shares of Facebook parent Meta shot up a whopping 20% during Friday’s session, driven by the company’s largest quarterly sales growth in more than two years. It also paid a dividend to shareholders for the first time ever, underscoring the payoff from recent investment in artificial intelligence. Shares of online retailer Amazon also jumped nearly 8% due to a broad earnings beat and optimistic guidance.
Sentiment was further lifted by a strong US labour market report. Nonfarm payrolls increased by 353,000 jobs in January, nearly double market consensus, while the unemployment rate stayed steady at 3.7%, despite consensus for a slight increase. A strong labour market translates into more income for consumers, the driver of the US economy. While that worries the Federal Reserve (Fed), which is seeking to get inflation back to its 2% target, it is positive for corporate earnings.
In the Asia-Pacific region, stock markets were mixed on Monday, coming under pressure from an interview aired at the weekend in which Fed Chairman Jerome Powell said the central bank will move forwarded carefully with interest rate cuts this year. That caused investors to push back their expectations for the timing of Fed rate cuts. In China, the decision by the People’s Bank of China to reduce the reserve ratio for banks came into effect this week, but markets ignored the move. Somewhat positive for sentiment was the Services Purchasing Managers’ Index, which came in at 52.7 in January, remaining above the 50-mark, which separate contraction from expansion. Hong Kong's Hang Seng Index was trading up 0.1%, while the Shanghai Composite lost 0.7%. Tokyo’s Nikkei 225 was the only major Asian index to see notable gains, finishing Monday’s session up 0.6%. South Korea’s Kospi lost 1.5%, pressured by losses at Samsung. Australia‘s S&P/ASX 200 came down from its all-time high at the end of last week, closing Monday almost 1% lower.
Geopolitical tensions were also on traders’ radars as the US launched strikes against dozens of targets linked to Iran’s Revolutionary Guard in Iraq and Syria in retaliation for a deadly attack on US troops in January. Additionally, the US and UK struck dozens more targets belonging to the Iran-alligned Houthis in Yemen. The attacks targeted weapon facilities and other locations that could be used for further attacks by the Houthis on ships in the Red Sea. The escalation has the potential to disrupt shipping in the region, which is not only important for the transport of goods but also oil. Oil prices had been climbing in January but dropped last week on concerns about the world economic growth. Brent crude was finished last week above USD 72 and Brent below USD 78 per barrel.
Corporate news in focus: Quarterly figures from Caterpillar, McDonald’s.
Economic data in focus: Services Purchasing Managers’ Indices from several countries throughout the day, including France, Germany, euro area, UK, US; German trade balance; Sentix investor confidence for the euro area; euro area Producer Price Index; US ISM Services PMI.
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Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.